What is the reason why Evergrande has affected Minsheng Bank now?

Now Evergrande's debt-driven impact has affected Minsheng Bank.

First, for a long time in the past, China's economy mainly relied on the development of real estate to drive growth. Evergrande, founded in 1996, has grown rapidly at this stage. In 2009, Evergrande made an initial public offering in Hong Kong, successfully raising US$9 billion.

Debt-driven has always been the support for Evergrande's rapid development. By raising loans to buy land, and then selling houses quickly at lower profit margins, the company will revitalize the capital cycle, and then promote the rapid development of the company. But the paradigm has been fundamentally hampered in the last year.

On August 20, 2020, the People's Bank of China and the Ministry of Housing and Urban-Rural Development held a forum for key real estate enterprises in Beijing to draw "three red lines" for real estate financing, namely the asset-liability ratio after excluding advance receipts is greater than 70%, the net debt ratio is greater than 100%, and the cash short-debt ratio is less than doubled.

Second, if the "three red lines" are all touched, enterprises will not be allowed to raise funds. Against this backdrop, Evergrande was forced to sell its commercial housing at a low price. But recently, Evergrande said its asset and equity disposal plan to alleviate liquidity problems had failed to make substantial progress.

According to the bailout document that was debunked by Evergrande, Evergrande's liabilities involve more than 128 banks and more than 121 non-bank institutions, and the banks involved are also wide enough.

Third, there are 171 domestic banking financial institutions, with a loan balance of 216.3 billion yuan, mainly Minsheng Bank 29.3 billion yuan, Agricultural Bank of China 24.2 billion yuan, Zheshang Bank 10.7 billion yuan, China Everbright Bank 10 billion yuan, Industrial and Commercial Bank of China 9.4 billion yuan, and China CITIC Bank 9.4 billion yuan. JPMorgan Chase & Co. estimated in early September that Minsheng Bank had the largest risk exposure to Evergrande, and in terms of total credit, the bank has been strictly implementing unified credit management for group customers, including Evergrande Group. Since September last year, Evergrande Group has stepped up its efforts to withdraw real estate sales, and its exposure to credit drawdowns in the bank has declined.

At the same time, Minsheng Bank also mentioned that the bank will continue to track and monitor the changes in the operating conditions and financial status of Evergrande Group and its affiliates, maintain close communication with the other party, and actively take risk control measures in case of risk conditions.

Evergrande is at risk of defaulting on its debts, of which Minsheng Bank has provided Evergrande with a loan of more than 20 billion, which is the largest amount among the major banks, so it has also been affected to a certain extent.

At present, Evergrande has refuted the rumors, and most of the creditors have also signed a position agreement, and the short-term risk has been lifted.